Sure, the coronavirus crisis is about to grind American life as we know it to a halt. But let’s look on the bright side for a moment: Thanks to the panic in the financial markets, it now costs the United States government less than ever to borrow.
Earlier this month, yields on the benchmark 10-year Treasury fell below 1 percent for the first time in history. (You can think of yields as equivalent to interest rates for our purposes, though they’re not quite the same thing.) This week, the 30-year Treasury bond briefly dipped below 1 percent as well—which by Wall Street standards is a wild, physics-defying development, sort of like watching a hippo perform a gymnastics vault.
The reason this has happened is simple enough: All over the world, investors have reacted to the pandemic—and the international oil price war that it spurred—by selling risky assets like stocks and buying relatively safe government debt. As demand for bonds rises, prices go up and yields fall. Right now, the markets are so terrified of where the economy is headed, and have so few safe places to store their cash, that they are willing to lend the U.S. government money for decades at a time at a return of about 1 percent or less.
Or, depending on how you look at things, it’s even cheaper than that. Ten-year Treasury securities that adjust their payments for inflation are actually offering negative rates. In English: When you take purchasing power into account, investors are actually willing to pay the U.S. government to borrow right now.
And we should obviously be taking them up on it. After all, there’s an economic crisis in the offing. And while stimulus spending can’t fix all of the problems that the coronavirus will create, it can definitely cushion the pandemic’s blow and prevent a downturn from turning devastating. Plus, we have all sorts of roads, bridges, tunnels, and such to fix. We can now do so without having to worry much about the cost. And I mean that not in a flip, bloggery sense, but in a strict, technocratic one: The government can currently borrow at long-term interest rates that are probably lower than the rate at which the economy will grow, which even completely orthodox economists will tell you means it’s perfectly safe to take on debt. These low bond yields are the market’s way of telling us that it really is time for Infrastructure Week.